One year ago, YC backed betting market Kalshi launched with CFTC approval. They employ a former commissioner of the CFTC as Chief Regulatory Officer, and two weeks ago applied for CFTC approval to have election markets. And half a year ago, the popular unapproved blockchain betting market Polymarket was fined and shut down in the US by the CFTC.
Further reading:
https://twitter.com/NathanpmYoung/status/1555387422510264321
https://www.cftc.gov/csl/22-08/download
https://astralcodexten.substack.com/p/the-passage-of-polymar...
If people who hold conspiracy theories put down money and lost, maybe that would do more to change how people think than any political debate ever could.
> If people who hold conspiracy theories put down money and lost
If people who say that the government claim on X is true had to put money behind it, we'd see a massive wealth transfer from smirking status quo guys to little groups of conspiracy theorists. Half the time (like for example the missile strike on that family of saints as we left Afghanistan), the government line has been disproved before the press release even gets out; easy money.
edit: if anything, Predictit acts as a summary of current media coverage/sentiment.
Worse still - you have people who would pump & dump the market - pushing the contra position (Trump wins 2020) and post comments showing showing holdings supporting contra, and then dump after it gains a significant share. I've heard of some predictit users doing this same operation 5x or more on a single market (an iconic example: Iowa Dem Primary 2020).
So it's all speculation.
In general, I agree, looks like regulatory capture by Kalshi.
The talk about "rational markets" in this thread is well-meaning, but I think it could better targeted toward BetFair and other uncapped foreign markets. PredictIt has a cap of $850 from any individual in any market, which means almost no market is dominated by "sharps" exploiting differences between prices and reality. Sure, PredictIt's prices are often more accurate than the average person's guess, but they still exhibit a lot of small and predictable biases:
- "Yes" positions are more popular
- Pro-Republican positions are more popular
- Cheap, improbable positions are more popular
- Positions confirming simple ideas are more popular
- Positions traders wish were true are more popular
- Things being discussed on the news are treated as more contentious than they are
Ultimately, almost all of my 100x growth just boiled down to finding these biases and maximizing my expected log(return) with them in mind.
I do believe PredictIt was good for discourse. Though it may have ultimately affected a small number of views, the "put-up-or-shut-up" mentality is much closer to the scientific method than media and its tendency to navel-gaze. The domain of PredictIt markets was small, but I often imagine a world which creates this kind of ecosystem for a broader array of scientific fields.
For me, though, this is the end of the line. The 2020 races (with Georgia runoffs) risk being unresolved by the 2/15 deadline, and it's impossible to predict what PredictIt will do then, much less if markets will properly price that in. It's been a fun run, and I'm glad it lasted as long as it did.
PredictIt has two fees: A 10% fee on winnings, and a 5% fee on withdrawals.
The 10% fee on winnings is only on winnings. So when buying a share for 90¢, your $1 won will earn 99¢ and pay 1¢ in fees.
This means in a market with multiple candidates, betting "No" on all of N candidates will always earn you $(N - 1) without fees. That's is a winning bet iff all the "No" shares add up to $(N - 1.1111). In practice, the bias toward "Yes" shares alone is strong enough that buying all "No" shares, even at current asking prices, usually cost between $1.07 and $1.10 less than $N.
So, if you're only buying "No" shares in markets with multiple outcomes, the prices are set close to a point that entirely negates that 10% fee.
And of course the 5% fee on withdrawals is only on withdrawals. If you send the money straight back into another trade over and over, the fee is diluted enough to be irrelevant to any individual trading decisions.
You can take the suckers' money, but you end up still being a sucker because your money is locked up.
What I find amusing is that they have some Plaid-type integration for deposits but withdrawal still needs this routing number / account number shit.
From that framing the government should have no authority whatsoever to take action against PredictIt: doing so is a gross violation of natural rights. To me this seems like an error comparable to restricting freedom of religion, detaining someone so as to prevent them from voting, or the burning of an intellectuals book and the jailing of them so as to prevent the spread of their ideas. It seems an abomination.
What is the justification? Just that there was gambling or is there a deeper fundamental problem that I am missing? Gambling to me seems more fundamental to reality than breathing. Everyone engages in it all the time, but we just don't call it that when we think it might be a gambling category which is of benefit to society.
If there is no justification - what paths can be pursued to permanently sunder the governments ability to take this sort of action in the future? I say all this with no sense of judgement for the CFTC; clearly this is within their mandate under reasonable interpretations. Rather, I think other mandates - more important ones - supersede theirs and should be restricting their authority.
I wanted to create markets for things like individual airline flight delay insurance, and a futures market for airline tickets, but all of these are regulated as futures with the same barriers to entry that protect stock exchanges, and there are some rules in insurance about not being able to take out insurance on someone elses' property for related reasons. It's a moral hazard. Betting on politics appears to be framed in similar terms, but the counter arguments would be interesting as well.
I gave up on prediction markets years ago, but if there were a darkweb prediction market for smart contract cryptocurrencies, that would be the most subversively interesting thing to become real in a while.
So does the very existence of the media, which will amplify any sufficiently gross act of violence to the global auditorium that would otherwise never hear of it, rewarding the culprit with their 15 minutes of fame and possibly inspiring others to do the same.
That isn't a reason to censor journalists, though.
Is that the line of reasoning CFTC is using though?
> if there were a darkweb prediction market
I think this is Polymarket / Gnosis right? Or are you looking for something more obfuscated?
Assuming you mean "using" instead of "for", isn't this Augur? (That said, I haven't used Augur personally; maybe it sucks.) Building prediction markets is one of the more common and older projects for crypto.
Dammit, I had forgotten about the whole "hire a hitman while pretending to just make predictions" thing. It probably isn't just a spooky theory anymore :/
PredictIt linked to CFTC and CFTC explains their original act and their justification for the withdrawal in extensive detail in documents linked from there.
If you’re actually curious and not just trading outrage for upvotes (I assume not), I’d love to see how your impression evolves in light of the actual facts available to you.
On one level - you don't even seem to have recognized what I was asking about. I wasn't asking about the justification for this particular decision: you'll note I explicitly mention that this is in the mandate for the organization. So any reading that thinks I'm talking about that is actually just a misreading of my point.
I'm asking if it even make sense to allow the government to prevent discussion of political issues using a mechanism which has some basis in being mathematically rational? It really doesn't seem obvious to me that the government ought to have the power to do so. I'm not asking for the justification for this decision. I'm asking if there is a justification for political oppression of the mathematically minded more generally.
That said - even under the framing that the letter answers the misunderstanding of what I was asking about - I still don't find it to have done so.
The letter is vague with respect to which particular issue they were breaking; it listed the things not which of the things they contested were not the case. The extent to which it is vague is such that even on the linked page PredictIt contends it still has not broken the commitments.
This isn't the extremely specified justification you seem to think it is - at least not to someone who isn't extensively familiar with PredictIt; and apparently given PredictIt didn't acknowledge that it felt it was out of line - it isn't even something that someone with extensive familiarity can easily spot.
Their letter suggests that they were specifically withdrawing the right of predictt to operate without registration. It seems like the discussion can be advanced by registering.
It's not because it's some kind of privileged form of understanding the universe. You need to do a lot more work to have your hobby horse hitched to the protections and privileges it receives.
An alternative theory is that this market was providing information that the current regime is looking to suppress: actual popularity of candidates, policies, etc.
Any speech that violates the official narrative is deemed wrongthink and seems to be fair game for law enforcement/regulators.
I don't mean to suggest that this is the intent.
I'm saying it seems to me that something worse than that is the fundamental consequence of the decision. Banning the mathematically rational discussion of politics is actually a bit more extreme than say murdering and burning the books of intellectuals; in terms of attacking truth it does so on a more fundamental level, it is like banning the use of addition as a method of counting - an attack on the very process by which things are known, not just a person. You aren't just murdering one person - this kills an entire category of rational agent; it isn't a ban on knowing a particular fact that is inconvenient. It disallows the seeking in a much more general way.
To try and maybe get across the nature of the violation: this seems to me about as bad as the government declaring that the scientific method was no longer allowed to be used or that people were no longer allowed to have faith. For sure methods of arriving at the truth can be very dangerous, but I don't think it follows from that that the government ought to be allowed to prevent their use for that purpose.
So I'm wondering what I'm missing - or whether there is actually an overstep of authority that ought to be reigned in.
I see enough "democrats in disarray" or shitting on the Biden admin (maybe both justifiably! That's irrelevant for this post) from allegedly left-leaning outlets that this seems incredibly unlikely to be true. If it is, they're entirely failing at it. Or have for some reason decided to focus only on minor players while major players, with 100+x the audience (ask around in the real world and see how many people have even heard of PredictIt), carry on as usual.
just because you choose to assign it some other emotional value doesn't change that the core purpose is illegal
"i'm not burgling, this is how i engage in understanding economics and the primary means of discourse, and the government should have no authority to take action against me"
The bigger question here is, why is it illegal? Most rational adults understand that the arbitrary decision to ban adults from "gambling" their own money in certain ways, while promoting gambling in other ways is absolutely ridiculous. Here in New York I can today bet on sports and horse racing from my phone or my computer. I am pilloried with ads to play lotto - perhaps the worst form of gambling with only a 50% return on investment in most games - by the state itself! But it is illegal for me to gamble on a skill-based game like poker or predict-it. It reeks of the authoritarian hypocrisy that is the defining feature of our government on every level.
The comment you're replying to is an argument that it should be legal. It's current status as illegal is not a counterargument.
> [Victoria University] has not operated its market in compliance with the terms of [the 2014 letter granting no-action relief].
Nowhere does the CFTC state exactly what the alleged violations where, so we can only speculate. It certainly lends support to the hypothesis that the no-action withdrawal is regulatory capture by a competing prediction market.
[1]: (Forced PDF download) https://www.cftc.gov/csl/22-08/download
The whole thing is that, the media now cannot say that elective x has a 65 approval rate (based on a survey of 6 coworkers) when on Predictit is at 10%.
also
"It is a shame that a financial incentive to manpiulate elections or to vote for a candidate for any reason except the voter's confidence in that candidate got banned"
I'm not saying I definitely want political bookies banned, but I don't immediately see how it is anything but a detriment to honest decision making in choosing how to respond to issues. Maybe I'll vote to take away some human rights if the election is close and I can make a few bucks?
Or from another angle:
Changing your individual vote in an attempt to shift the outcome of an election is extraordinarily unlikely to actually make the difference, so prediction markets most likely punish people (with losses) who try to game it with their own votes. If you and a large group of people plan to do this, that will be priced into the market, preventing you from profiting very much.
Not “without a doubt”.
Gambling means a game of chance/luck. Court cases over poker, regardless of which way the decision goes, hinge on whether the Court is convinced that poker is a game of skill, rather than luck.
Predictit definitely did not want to issue W-2G, because that is for gambling income, and their position is of course that their platform is not an illegal gambling service.
I think that it’s pretty easy to argue that consistently winning money on a prediction market is a matter of skill. Just like consistently earning money on the stock market.
Of course, both can be used for gambling.
So if prediction markets are not allowed, why are day trading or stock futures allowed? A casual read of a few relevant subreddits will show that there are a lot of people “straight up gambling” with financial markets.
It’s a real shame that prediction markets aren’t allowed to operate in the US. Markets (of any sort) are incredibly useful.
Disallowing them because you can use them for gambling is throwing the baby out with the bath water.
Stocks are different because they are assets. You get something for your money.
Now, I don't gamble, but in December 2020 I was able to use that platform to "bet" that Donald Trump had lost the US presidential election he lost the previous month. I "won" a bunch of money. Because lunatics had decided facts aren't true, we can just make up whatever we want, and it took a few weeks for that to get knocked down and meanwhile you could just bet against these morons.
As to financial instruments: For a bunch of the instruments you are actually buying something, and these are clearly just fine. If you buy Oil futures or Pork futures that actually literally deliver oil (or pork) and you're holding them when they come due, you're getting oil (or pork). This is probably not what you wanted, but that's what those instruments do, the people who were supposed to be buying them want oil, or pork, and so they're happy, too bad for you.
I agree that some derivative instruments might just be gambling, these instruments are also too risky and poorly understood, so if you say we should ban those with gambling I don't see why not. Again, gambling is legal in my country, and so are these derivatives, but the Americans can choose different, as they have on many things.
I think it really just has to have an element of uncertainty. For example one can gamble on chess tournaments. I suppose one can broadly construe an element of "luck" if Magnus somehow botches a game, but it strikes me as something quite different from whether or not one's lottery numbers come up.
As you say, poker is the archetypical example of a skill game with an element of chance. Backgammon is another good example. I would say darts is another example that falls further on the skill end.
> So if prediction markets are not allowed, why are day trading or stock futures allowed?
As noted in another comment on this submission, it appears one can greatly increase the chances of regulators approving an activity by having former regulators on staff. Needless to say traditional finance companies enthusiastically hire those people.
It would probably have to be based on having an elected council (with an odd number of members) signing off on the outcome of a market. If people see a bias in their history (which of course should be public), they will factor that into their bids, hopefully discouraging people from getting on the council to make money on their own bids.
And of course the council should be elected with some kind of ranked-choice/condorcet so you tend to elect centrists rather than extremists.
There are also no-money markets like Forecast and the traditional forecasting competitions like GJP and Metaculus
In hindsight, it was obvious.
> DMO has determined that Victoria University has not operated its market in compliance with the terms of the letter and as a result has withdrawn it.
https://www.cftc.gov/PressRoom/PressReleases/8567-22
For the "other side". They got a waiver to operate an unregistered securities market, as a non-profit University-based organization. They allegedly did not operate it as they said they would, so they are losing their waiver. If companies want to offer these services, they are entirely within their American rights to do so legally.
Think about it, you're trying to get people to process and offer up unknown information, right? Focus on that.
It's bounties for verifiable information. Not predicting, or a game of chance. You pay for information to be brought up that you would never have thought to look for.
If you do it that way, you're completely sidestepping the issue of providing a gambling primitive. You're just incentivizing data collection and dumping. The outcome becomes secondary, the context generated maintains primacy, and I wager what markets are really interested in is looking at highly accurate predictors and trying to infer what channels of information they're privy to in order to expand data observation pipelines.
Unless these "prediction markets" really are just some high brow word for gambling parlors. Then again, I always figured that was all futures and derivatives trading were, yet there is a staunch refusal to classify them as such.
